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Monday, April 4, 2011
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Radio Ads - Online Growth Flatlined

Borrell Associates rattled a few radio industry executive suites last week with its ninth annual report - "Benchmarking Local Online Media: 2010 Revenue Survey."

The cause for concern was its reporting that radio received only a 2.1% slice of the local online advertising market last year. The prediction is best summed up, perhaps, by the headline on the full report's Fig. 5.2: "Local Radio Online Revenues: Comparatively Low, and Little Prospect for Growth."

"There was a time when 'theater of the mind' played a big part in selling products with radio commercials. It's not a concept that's exercised frequently anymore."


"Are online audio commercials in need of a facelift?"

Borrell states: "In 2010, local online media accounted for 14.9 percent of all local ad spending, or $13.5 billion." That's close to radio's current annual revenue. With new media only being around since the late 1990s, even old-time radio industry vets need to admit it's a rapid rise. This year online is forecasted to reach $15.9 billion, with a healthy $24 billion predicted by 2015.

I've known Gordon Borrell since he first started producing these annual reports, and even helped write his first report on the radio industry. When the team at Borrell Associates lays claim to specific numbers it's because they have reams of data to back up those claims, and a good basis for arriving at forecasts. It's why I want to discuss a small, under-reported statistic in this latest report.

My thoughts wrap around one segment of online ad spending - automotive, and just one small piece of that segment - online audio advertising. Digest this chart, especially the next-to-last line.

Online audio's revenue in automotive sales was $63,000,000 in 2010, a 3.1% share of all local online automotive ad spend. By 2015 it's expected to reach $107 million, a 68% increase in volume. However, at only a 3% share of all local online automotive ad spending, the category will not be growing. Why? (Streaming audio is only 19.7% of radio's total 2010 online ad revenue.)

Is there anything within an audio commercial that is keeping this medium from being used/valued more? Having produced over 10,000 radio commercials when "theater of the mind" was our main objective, it's my view that today's audio ads need a facelift - especially for use online.

There was a time when "theater of the mind" played a big part in selling products with radio commercials. It's not a concept that's exercised frequently anymore. The best example of its non-use is with the push for HD Radio, a succession of rambling sales pitches cloaked in hyperbole (station between stations?). A close runner-up is the short-lived "Radio Heard Here," a campaign with no message.

Stuck in our ears as a picture of nearly every automotive commercial is the screaming of price and product. That is a literal SCREAMING to the point of being obnoxious and, as many creative types claim, ineffective.

If radio's desire to be in more mobile devices is true, I'll suggest that the approach to audio commercials needs to be rebuilt. We're not talking about a small change, but one as dramatic as dropping "theater of the mind." When radio took the visual out of an audio ad it lost a valuable part of what made people pay attention to radio advertising.

Borrell says: "By 2015, the majority of all 'online' advertising will become untethered from desktops and will be delivered to mobile devices such as iPads and other tablets, smart phones, and GPS-enabled laptops." If radio is to increase the share of local online revenue it gains from airing audio ads, there needs to be a concentrated effort to 1) make the ad more palatable for the overall audience, 2) create an audio commercial styled for use online and in mobile delivery, and 3) tie the commercial back to an online action that can be documented and accounted.

Online audio, whether selling local product or national, cannot be the same form of audio commercials which the radio industry has run over the past decade. How the listener hears them has changed; how listeners respond to these dinosaurs of sound has deteriorated.

The audio commercial must be remade, starting with a re-evaluation of its online objective. If radio wants to gain ground in an increasingly cluttered local online ad market, it needs to give advertisers more reason to choose audio commercials.

Relative to the growth in local online advertising, the radio industry can't afford to let its share of the audio ad market flatline.

Publisher's Note: Gordon Borrell was kind enough to offer an outsider's opinion of radio's approach to new media. It may be wise to heed words from someone who has access to volumes of data:

"Radio stations havenít committed the resources required to get a greater share of digital advertising. I honestly think itís because most of the industry is owned by dispassionate investors, and management leadership doesnít have the clout or foresight to convince investors that the Internet will pay off in the long run. The basic structure of the radio industry is a classic example where innovation isnít rewarded. Profitability is. And you canít keep profits up if youíre hiring new people to build out a new web site and sell it. They rely on their existing staffs to do so, which is a mistake.

I donít think everyone should look at them and say, 'What idiots!' Itís nothing more than a decision to stay focused and maintain profitability instead of getting caught in some sort of opportunity trap."

(Download Borrell's report here.)

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